Phillips 66 inks three logistics pacts to boost crude supply for US refineries

3/20/2013

By SAABIRA CHAUDHURI

Phillips 66 reached agreements with Enbridge Energy, Targa Resources and Magellan Midstream for rail loading and terminaling services and a pipeline project, a move the energy company said will increase supplies of cost-advantaged North American crude oil to its US refineries.

"We are aggressively pursuing increased access to advantaged crudes in North America by partnering with leading third-party transportation providers and better leveraging our own system capabilities," CEO Greg Garland said.

"Increasing our utilization of those advantaged crudes should allow us to capture significant value in our refining and marketing businesses."

Under the agreements, Enbridge agreed to a three-year deal for railcar loading of Bakken shale crude at Enbridge's Berthold, N.D., terminal beginning in May, with volumes ramping up to 35,000 to 40,000 bpd by November.

The crude oil will be delivered to Phillips 66 refineries on the West and East Coasts, and the company may also pursue opportunities to send it to its Gulf Coast refineries.

Separately, Targa agreed to provide rail unloading and barge loading services in Tacoma, Wash. The five-year agreement, which began in late 2012, allows advantaged US or Canadian crude oil to be unloaded from railcars at Targa's Tacoma terminal and transloaded onto barges for delivery to the Phillips 66 Ferndale, Wash., refinery.

The facility also allows for delivery into the San Francisco, Calif., refinery, where crude imported from outside of North America could be replaced.

Phillips 66 also detailed its agreement with Magellan to transport advantaged crude on Magellan's pipelines near Phillips's refinery in Ponca City, Okla. The project will replace West Texas Intermediate crude from Cushing, Okla., with virgin crude from the nearby Mississippian Lime play.

Phillips 66 said is also investing in its own transportation assets in Oklahoma to transport an additional 40,000 bpd of Mississippian Lime crude to the Ponca City refinery, and at the refinery to accept crude from the Magellan project.